Retailers fear fallout from Oregon’s proposed tobacco tax increase

COSTLY SMOKES: Oregon considers raising the cigarette tax, and letting counties set their own rates.

By Shelby Sebens | Northwest Watchdog

Small retailers and convenience stores will be hurt if Oregon increases its statewide tobacco tax, giving local governments the authority to levy their own rates, opponents say.

Two pieces of tobacco legislation are pending in the Oregon Legislature and tobacco industry giants like Phillip Morris, John Middleton and U.S. Smokeless Tobacco are taking notice. They’re providing retailers with information and encouraging them to lobby against the proposed bills.

Oregon will consider raising its statewide tobacco tax from $1.18 per pack to $2.18. That proposal, House Bill 2275, sits in the House Revenue Committee.

Another piece of legislation,HB 2870, would give counties the option of raising their own tax on top of that. It narrowly passed the House by a 31-29 vote and now sits in the Senate Committee on Finance and Revenue. The bill would require counties to contribute 40 percent of the revenue to tobacco prevention programs and could not exceed the state tax rate.

This worries Richard Kosesan, executive director of the Oregon Neighborhood Stores Association. He says if counties can levy their own taxes it will lead to inconsistent prices.

“In all probability if it was a significant tax, your customer base would move to the next county,” he said. “It’s a system where unfortunately you would pick winners and losers.”

Cigarette sales account for 38.2 percent of in-store sales at convenience stores nationwide, according to the National Association of Convenience Stores

But county officials eyeing the increased revenue say it’s a win for economically struggling areas and public health outcomes.

“We believe counties ought to have the ability to exercise local control,” said Eric Schmidt, communications manager for the Association of Oregon Counties. “It will also send a message to smokers that they need to consider their habit and if they don’t want to pay that tax they should quit.”

Oregon’s tobacco tax is less than the national average of $1.48 but significantly higher than some neighboring states – Idaho’s tax is 57 cents, Nevada’s is 80 cents and California’s is 87 cents – opening the door for a potential black market.

Only Washington is higher, at $3.025, and 35 percent of the cigarettes in the state are contraband, meaning they either came from cheaper tax states such as Oregon or Idaho or from the international market.

Oregon lawmakers are now putting together a state budget for the 2013-15 biennium, but Republicans and Democrats have hit an impasse over tax increases. Democrats, who control the majority, want about $200 million in increases on the wealthy while Republicans are pushing for more pension reform.

After two days of talks between Gov. John Kitzhaber and legislative leaders on both sides, they’re still at a stalemate.

It’s unclear if the tobacco tax bills will move. The county authority bill has made more progress, likely because it does not need a two-thirds majority to pass as the statewide tax increase does.

The smoke shops and neighborhood stores are locally owned small businesses, not evil “big tobacco” as the article wants to imply. We know what the drafters of this bill do not know – John Q. Public will go to great lengths to escape their taxing schemes. People will drive ten miles to save a nickel a gallon on gas, imagine how far they will drive to save a buck on a pack of smokes.
We will see intra counrty smuggling of cigarettes and other tobacco products. The counties will not see anything near the level of revenue they are projecting. Government always over promises and the blame the citizens for under delivering.
Bad legislation that should not pass.

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